Soda pop, sales tax targeted to cut deficit

[I AM NOT THAT GUY 5,715]

(Reuters) - Warning of a "death spiral" without drastic changes, a group of experts on the U.S. federal budget deficit on Wednesday called for a 2011 Social Security tax holiday, a soft drink tax and government spending freezes.

In an ambitious plan to slash the deficit and the fast-mounting national debt, the group also called for a new 6.5 percent national sales tax, as well as lower and simpler individual income and corporate tax rates.

Former Federal Reserve Vice Chairman Alice Rivlin and former Republican Senator Pete Domenici -- both veterans of Washington's long-running deficit wars -- headed the 19-member group organized by the Bipartisan Policy Center, a think tank.

Domenici called the deficit "a quiet killer" undermining the economy and compared the effort required to vanquish it to the sacrifices made by Americans during World War II.

At an event to unveil the center's plan, Rivlin said its twin goals were to boost the economy and "drastic tax reform."

It comes as a presidential commission targeting the same problem reconvenes on Wednesday for another closed-door session with just over two weeks before its final report is due.

Americans are worried about the deficit and want action, polls show, but politicians cannot agree on tax hikes and spending cuts, even though experts say both are needed.

Federal Deposit Insurance Corp Chairman Sheila Bair said at a conference in New York on Wednesday that she did not see short-term risk from the deficit. But she said, "There is a systemic risk to the financial system if structural deficits are not credibly addressed over the next few years."

Dramatic proposals unveiled last week by the leaders of the presidential commission were widely dismissed as unworkable taken as a whole. But they did succeed at grabbing the spotlight for an issue that U.S. voters earlier this month in the midterm elections made clear is a top concern.

BOWLES: DENIAL OVER

"What's clear to me is that the era of debt denial is over," Erskine Bowles, co-chairman of the presidential commission, told reporters on Tuesday evening. The other co-chairman is former Senator Alan Simpson.

Bowles said the 18-member commission, appointed earlier this year by President Barack Obama, has agreed on the need for caps on discretionary spending and that defense spending is on the table. The panel will meet again on Wednesday, when it will discuss taxes and Social Security, and on Thursday.

Rivlin said that Bowles and Simpson have been briefed on the Rivlin-Domenici plan. She is a member of the Bowles-Simpson commission, as well.

Underscoring discord on the presidential panel, one of its Democratic members, Representative Jan Schakowsky, unveiled her own alternatives to the Bowles-Simpson proposals.

"I am releasing my own plan today because I believe that there is a better way to achieve our goal -- one that protects the poor and the middle-class," Schakowsky said on Tuesday.

Schakowsky's plan does not contain any cuts to Social Security, which she said "has nothing to do with the deficit."

SUGARY DRINKS TARGETED

One of the Rivlin-Domenici proposals is "an excise tax on the manufacture and importation of beverages sweetened with sugar or high-fructose corn syrup." Others are cutting farm payments and tinkering with Social Security.

Their plan would kill the mortgage interest and charitable contribution tax deductions and replace them with 15 percent refundable tax credits anyone could claim. The group said the plan would boost the economy, create jobs and balance the budget -- excluding debt interest -- by 2014.

"Rising debt and rising interest costs could evolve into a 'death spiral' ... Even without a crisis, rising debt will increase our reliance on foreign lenders," said the Rivlin-Domenici group, which has no official government role.

The U.S. budget deficit is presently $1.3 trillion and the national debt is more than $13.6 trillion.

http://www.reuters.com/article/idUSTRE6AG31U20101117

[luckytxn 2,265]

Just think of the effects of a balanced budget would have.

[scandal 951]

http://www.pbs.org/newshour/bb/business/july-dec10/deficit_11-17.html

JUDY WOODRUFF: And for more about their proposal and other ideas being discussed, we are joined now by former Budget Director Alice Rivlin and former Senator Pete Domenici.

It's good to have you both with us. Thanks very much.

PETE DOMENICI (R ), Former U.S. Senator: Thank you. Thank you very much.

ALICE RIVLIN, former director, Congressional Budget Office: Good to be here.

JUDY WOODRUFF: Now, let me just start by saying, with all due respect, you have done a lot of work here over the last year, but why not leave this up to the presidentially appointed commission?

Alice Rivlin, you're a member of that commission. It's already created waves. It's dramatic. Why not leave it up to them?

ALICE RIVLIN: Well, we're not taking over for them. We're just offering our ideas.

We got a group together. And this started before there was a presidential commission -- that the senator and I agreed to co-chair this group. We got 19 people from across the country, former governors and senators and mayors and some budget experts, and created this plan.

So, we think it's a very good answer, not only to how do we get out of the recession, but how do we solve this big debt problem. And we're offering it in hopes that it will be taken seriously.

JUDY WOODRUFF: Senator...

PETE DOMENICI: But, Judy, we have got to understand that the president's commission doesn't have a plan. We have a plan. Ours is completed. There's consensus. Everybody on it was: It's a plan. I sign on.

JUDY WOODRUFF: Of your task force?

PETE DOMENICI: Of our task force.

JUDY WOODRUFF: Part of the Bipartisan Policy Center.

PETE DOMENICI: Bipartisan -- yes, Bipartisan -- and so we started it, and we have to finish it.

And it's terrific. It's the best plan ever seen. And I'm hopeful that Erskine Bowles and Simpson do something, but, as of now, they have a series of ideas, many of which are the same as ours or similar. And we have an obligation now to get ours out there. And, frankly, I'm going to repeat myself, but to both get the recession out from under us and get ourselves moving again with a growth-oriented country that has a future, our plan is just a terrific plan.

JUDY WOODRUFF: Well, let me -- let's talk about some of the specifics.

I mean, one way your plan, Alice Rivlin, would differ from this commission, the Simpson-Bowles plan, is that you would suspend the Social Security payroll taxes for a year. That's good for people, in that they wouldn't have to pay the taxes. It would add to the deficit by $650 billion.

So, my question is, how do you -- your -- one of your principal goals is to cut the deficit, but you're adding to the deficit when you start out.

ALICE RIVLIN: Yes, we think that the country faces two big problems. One is, we have to get out of this recession. We have to be -- we have turned the corner, but the economy is not growing fast enough, and unemployment has got to come down faster.

So, we think that the payroll tax holiday, which puts money in the pockets of all working people, and also help employers, is a good thing, but it's a temporary thing. Yes, it would add to the deficit. But, at the same time, simultaneously, we believe that the Congress should adopt a broad range of deficit-reduction measures, and that that itself will help us get out of the recovery.

JUDY WOODRUFF: And, Senator...

PETE DOMENICI: But you have got to understand -- you have got to understand one thing. We have got to make the point for your viewers. We can afford a one-year holiday, because, at the end of our work, when we have cut everything we can, when we have reformed taxes, we put on a two-year -- it's implemented in two years -- sales tax on consumption that will pay for the cost of the one-year -- one-year holiday.

So, we don't add to the deficit.

JUDY WOODRUFF: So, you do impose -- you would impose a 6.5 percent national sales tax. And you would lower -- you would simplify the tax code...

PETE DOMENICI: Lower the income tax.

JUDY WOODRUFF: ... lower income tax, corporate tax rates. As you know, there are progressives out there today who are saying what you're doing is a big hit on the backs of working people.

PETE DOMENICI: Well, not so. I mean, she can tell you with more specificity, but it's quite the opposite. Our plan, in its totality, is more progressive than the current income tax system of our country, by far, because we have the reform in the tax code. Plus, we kept two very major programs for child care and the low-income workers. They have been improved, and they get very good benefits. And when you put those in the mix, it's more progressive than what we have got today.

JUDY WOODRUFF: You also, as we said, made some pretty dramatic cuts in spending, in both domestic and -- freezes in both domestic and defense spending across the board.

Why is across the board, Alice Rivlin, better than looking at it program by program?

ALICE RIVLIN: Oh, we don't intend this to be across-the-board cuts. We expect...

PETE DOMENICI: On everything.

ALICE RIVLIN: On everything. What a freeze means is that the total is frozen. The Defense Department, for example, would have to figure out how to live within a fixed total. Now, that means that they could phase out and eliminate some programs that are no longer necessary or are low-priority, as Secretary Gates has already started doing, but emphasize the things that are high-priority and are needed, similarly on the domestic side.

You wouldn't want to cut across the board an equal percentage. That would be crazy.

PETE DOMENICI: Besides, Judy, you've got to know and our -- your listeners have to know that, on the domestic side, there are literally thousands of programs.

We wouldn't have -- it wouldn't be right for us to go through and talk about each one. We just said the pot won't grow for four years. And if it's capped, you're going to have to go within that domestic program and decide which ones you want and which ones you don't.

JUDY WOODRUFF: But the perennial problem with cutting is that people -- everybody wants to reduce the deficit, but, when it gets to specifics, that's when you run into problems.

How do you plan to sell this on the Hill or to the American people, for whom many of these programs are popular?

PETE DOMENICI: Well, I will take it first.

I believe the reduction in domestic appropriated accounts, which we're talking about now, the pot of money with a cap on it, and the pot for defense, and with a cap on it, that's much easier to sell than most parts of this budget.

The parts that are hard to sell are the fact that we must have a new source of revenue after we're finished with all the cuts. We can't cut enough to get ourselves where we want to be in terms of the debt. And so we have to put a new tax on. That's the part that people are going to get angry about.

But we have the make them understand that we have a silent killer out there, and we have got to fix it. And fixing it means you might have to have some new revenue, like we recommend.

JUDY WOODRUFF: And that is going to run into its own buzz saw.

ALICE RIVLIN: Yes. Anything that you do that fixes this big looming debt problem, where the debt is -- if we do nothing, is escalating very rapidly, anything you do is going to be unpopular, whether it's the spending side or on the revenue side.

So, yes, some of the things that we suggest, by themselves, would be very unpopular. But the point of this is, do it altogether and we will avoid the crisis that we think would destroy the U.S. economy.

JUDY WOODRUFF: You both know this town very well. How much do you -- how realistic is it to believe that a significant piece of what you're proposing will be enacted?

ALICE RIVLIN: Do you remember the '90s? We...

JUDY WOODRUFF: I do.

(LAUGHTER)

ALICE RIVLIN: We got a surplus. We both worked on that.

And we got the budget from a considerable deficit into surplus. And the way it was done was some tax increase and holding down spending. The caps on spending are the same idea that we had back in the '90s. And it worked. It worked. Yes, it worked.

PETE DOMENICI: I want to say this one thing about this. And, as far as I'm concerned -- tell me what I'm talking about, because I have forgotten.

JUDY WOODRUFF: About whether you believe that this will actually be solved, that the members of Congress will vote...

PETE DOMENICI: Oh. Yes. We were able to -- we were able -- we were able to do bipartisan work and get some big problems solved. This problem is many, many more times difficult for America. We're going to be ruined as a nation and become a second-rate country if this debt is allowed to continue like it is.

So, we have a bigger, a more just reason to convince people. We convinced them then to work together. We ought to be able to now. It won't be easy, but I believe leadership, including leadership from the president, is going to make this a war, a war on this debt. And, if we do that, we might win.

JUDY WOODRUFF: On that sobering note, Pete Domenici, Alice Rivlin, thank you both.

ALICE RIVLIN: Thank you, Judy.

PETE DOMENICI: Thank you, Judy.

[Danno 1,228]

People, you have to admit, it's rather comical... in the same year we are predicting our nation choking on our debt... we vote in another Gov't program (Obama care) which will rival SSI its self.

It has never been a tax problem, always a spending problem.

[scandal 951]

It has never been a tax problem, always a spending problem.

Pete Domenici, former Republican Senator from New Mexico and a respected conservative, obviously doesn't agree with you.

PETE DOMENICI: The parts that are hard to sell are the fact that we must have a new source of revenue after we're finished with all the cuts. We can't cut enough to get ourselves where we want to be in terms of the debt. And so we have to put a new tax on. That's the part that people are going to get angry about.

[Bad_Daddy 2,209]

I wonder how much money the US would save if we got out of Iraq and Afghanistan while also sizing down on the military and it's budget.

[I AM NOT THAT GUY 5,715]

ALICE RIVLIN: Do you remember the '90s? We...

JUDY WOODRUFF: I do.

(LAUGHTER)

ALICE RIVLIN: We got a surplus. We both worked on that.

Pete is pretty sharp, and knows where all the bodies are buried. Having Rivlin on board is a plus for credibility, especially among the fiscal conservatives on the left. I bet he misses Kasich, though.

I wonder how much money the US would save if we got out of Iraq and Afghanistan while also sizing down on the military and it's budget.

Not as much as you think.

Edited November 18, 2010 by ##########

[scandal 951]

I wonder how much money the US would save if we got out of Iraq and Afghanistan while also sizing down on the military and it's budget.

From http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html?choices=dp499br0

(posted a few days ago by AJ, didn't get the attention it deserved)

First figure for each item is money saved for 2015 budget, second figure is money saved in 2030 budget.

Military reductions:

Reduce military to pre-Iraq War size and further reduce troops in Asia and Europe

$25 billion $49 billion

Reduce Navy and Air Force fleets

$19 billion $24 billion

Cancel or delay some weapons programs

$19 billion $18 billion

Reduce noncombat military compensation and overhead

$23 billion $51 billion

Reduce the number of troops in Iraq and Afghanistan to 60,000 by 2015

$51 billion $149 billion

Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013

$86 billion $169 billion

None of these, even all chosen collectively, is enough. Compare to the entitlement program cuts, e.g.:

Cap Medicare growth starting in 2013

$29 billion $562 billion

Raise the Social Security retirement age to 70

$13 billion $247 billion

[Mr. Big Dog 10,747]

People, you have to admit, it's rather comical... in the same year we are predicting our nation choking on our debt... we vote in another Gov't program (Obama care) which will rival SSI its self.

And because the fiscal situation is so dire, we actually made sure it's funded. Unlike Medicare Part D which the GOP and Bush passed in times of rising deficits and debt w/o ever spending a single thought on where the funding will come from. The former was done w/o adding a penny to the deficit. The latter added hundreds of billions of dollars to the deficit. As well as those tax cuts that added trillions to the deficit because those were passed w/o any consideration that passing them would require offsetting reductions in expenditures - for fiscally responsible folk that is. See, Danno, that's what differentiates the GOP from the Dems. The GOP just whips out Uncle Sam's credit card while the Dems tend to make an effort to ensure that programs have funding - emergency measures to address the economic collapse notwithstanding.

[Danno 1,228]

And because the fiscal situation is so dire, we actually made sure it's funded. Unlike Medicare Part D which the GOP and Bush passed in times of rising deficits and debt w/o ever spending a single thought on where the funding will come from. The former was done w/o adding a penny to the deficit. The latter added hundreds of billions of dollars to the deficit. As well as those tax cuts that added trillions to the deficit because those were passed w/o any consideration that passing them would require offsetting reductions in expenditures - for fiscally responsible folk that is. See, Danno, that's what differentiates the GOP from the Dems. The GOP just whips out Uncle Sam's credit card while the Dems tend to make an effort to ensure that programs have funding - emergency measures to address the economic collapse notwithstanding.

That program of Bush's was the last straw for me, and that entitlement program alone will have crushing long term results.

Now seriously.... Do you really think Obama care is going to be paid for? and for how long?

[Dakine10 5,452]

Federal Deposit Insurance Corp Chairman Sheila Bair said at a conference in New York on Wednesday that she did not see short-term risk from the deficit.

Yeah no one ever sees the short term risks. That pretty much describes how we got to 13 trillion in debt and why it's not going to stop any time soon.

[Mr. Big Dog 10,747]

Now seriously.... Do you really think Obama care is going to be paid for? and for how long?

That all depends. We can go two ways on it: 1) we effectively utilize and preferrably strengthen the cost control mechanisms the bill has and finally get the fatally rising cost under control or 2) we gut those sections out of the bill and/or have Congress override each and every cost saving measure.

Go route one and there's a good chance that the cost curve can be bent. Go route two and we'll be no better off than we were before. The Tea Party crazies will try their best to go the latter course.

Look, I am all for coming up with better solutions - single payer would be my preference. Anyone that sits there lamenting that we better do nothing than trying to tackle the beast bit by bit or those lamenting that we go back to where we were a year ago aren't interested in solutions. We pay more than twice per capita on health care than any other industrialized nation and we're no healthier for it - we actually fare worse than our peers.

[ready4ONE 5,400]

Make no mistake a flat 6.5% Fed sales tax is going to fall much harder on the poor and middle classes. It absolutely kills me that anyone in the overwhelming majority are supposed to accept crumbs and with this plan, taxes on the crumbs, while paying the price to insure the ultra-wealthy keep their cake.